MNI SNB Preview-June 2025: Rates To Follow CPI?

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EXECUTIVE SUMMARY:

• Markets see a 25bp policy rate cut to 0.00% as most likely but do acknowledge the risks of an outsized cut into negative territory, with OIS-implied odds standing around 80:20 for a 25bps move vs a 50bps step
• Inflation has slowed further since the March meeting and turned negative, moving below the SNB’s target range for the first time in 4 years
• However, the SNB targets medium-term CPI trends, rather than short-term, which will be the focus in the update to inflation forecasts
• CHF has pared some of its strength seen in early April but remains firmer since March - further appreciation pressures may bring up SNB intervention again, which could complicate US criticism of currency manipulation